Sanctions were also lifted against three defence companies with close ties to the government in Minsk: Beltech Holding, Beltechexport and Spetspriborservice.

The ministers retained sanctions against four members of Lukashenko’s security service suspected of involvement in the disappearance of four political opponents in 1999-2000. An arms embargo also remains in place.

Lukashenko, dubbed Europe’s last dictator by the George W Bush administration, swept to a fifth term as president last October following elections independent observers said were marred by significant flaws.

Following the poll, the EU suspended sanctions for four months because the elections passed without a repeat of 2010’s violent crackdown against opposition forces. As well as the relatively peaceful aftermath of the poll, EU diplomats wanted to ease sanctions in response to Lukashenko’s decision to release six political prisoners last August, including Nikolai Statkevich, a presidential candidate in 2010.

The EU first imposed sanctions against Belarus in 2004, steadily extending them to more individuals and organisations following a series of flawed elections that returned Lukashenko and his parliamentary supporters to power in successive landslides.

On Monday EU ministers decided to lift most sanctions permanently, although they said they remained “concerned with the situation of human rights in Belarus”. Ministers also called on Minsk to abolish the death penalty and implement Organisation for Security and Co-operation in Europe’s recommendations on democracy before this year’s parliamentary elections.

A recent OSCE report said October’s election showed Belarus had a “considerable way go to” on democratic standards, noting the absence of safeguards against multiple voting, limited choice available to voters and the uneven playing field between Lukashenko and his rivals.

The EU’s view of progress in Minsk stands in stark contrast to the UN’s special rapporteur on Belarus, who said last week he had seen no changes in “the dismal human rights situation” in the country since the presidential election.

“Despite the partial suspension of EU and US sanctions, decided in anticipation of further advancement of human rights, the authorities have not ceased systematic harassment of those who attempted to practise their individual, civil, political and other rights,” Miklós Haraszti said. The authorities have not shown “any willingness to reform the entrenched, highly oppressive legal system”.

Haraszti, a leading light of Hungary’s democracy movement during the 1970s, cited “numerous cases” of violations of basic rights since the presidential election. During a court hearing in late January, two youth activists on trial and a journalist reporting on proceedings were beaten by riot police.

The journalist, Pavel Dubravolski, of the independent site Tut.by, was later charged with hooliganism and fined by the court. Earlier that month 30 people were charged with an administrative offence for attending a rally in Minsk. All public meetings in Belarus require official permission. Last October four opposition leaders, including Statkevich, were fined for organising a small rally outside the KGB headquarters in Minsk to remember the victims of Joseph Stalin’s repression.

Belarus has been ruled by Lukashenko since 1994; the KGB is still in business and there is no opposition in parliament. But he has been making overtures to the west following Russia’s seizure of Crimea and the crumbling of Belarus’s economy amid wider turmoil in eastern Europe. In a likely nod to Minsk’s role in hosting four-party peace talks on Ukraine, the EU said it valued “Belarus’s constructive role in the region”.

Joerg Forbrig, a fellow at the German Marshall Fund thinktank, said the EU was likely to have been motivated by geopolitical arguments, as well as wider fatigue with sanctions.

At a time when Russia was trying to extend its sphere of influence, supporting Lukashenko was seen “as the lesser evil”, Forbrig said, although added there was no evidence this was an effective policy.

The decision to lift sanctions “sends a very wrong signal to Mr Lukashenko”, he said. “It says to him: ‘We accept you don’t have to make any political reforms.’”

The EU foreign policy chief Federica Mogherini denied that geopolitical concerns had played a role, saying that decisions were always based on content and merit. “This is clearly not a rosy or perfect picture … but when we see significant, even if limited steps, in what we feel is the right direction, we feel it is right to encourage them,” she said.

Belarusian opposition leader Andrei Sannikov said the EU had made a very unfortunate decision that would have negative consequences for the Belarusian people, civil society and independent media.

“It is a very clear signal to the dictatorship that it can continue with its practices,” he said, speaking from exile in Warsaw. “We know when sanctions are lifted or the policy is softened we face more repression.”

Sannikov, who was beaten by riot police, after running for president in 2010, said the EU had a lot of leverage and could have taken a different approach. He suggested the EU should have imposed conditions on lifting sanctions, such as reducing spending on the police and the KGB.

“Sanctions are lifted from people that were defined as criminals by the European Union because they were guilty of falsifying elections, or persecuting and harassing opposition, of torturing opposition. All of a sudden these people are being pardoned by Brussels, although nothing has changed,” he said.

“The gross and systematic violation of human rights are still there in Belarus, so [the EU] is just blessing these practices.”